V i e w p o i n t | 12 Mar 2025 17:51:34 ET │ 9 pages North America Hardware & Storage Expert Call: Megatrends: Storage Supply Demand Dynamics Update. HDD Demand Persists, Supply Tightness; Flash 2H Improvement CITI'S TAKE On March 12th, we hosted a call with HDD/SSD experts, TrendFocus, following their recent Asia visit. We summarize the key takeaways inside based on the experts' opinion. HDD HDD build plans appear stable, with fairly solid demand continuing, on track for steady growth for 2025. Nearline d ...

J P M O R G A N North America Equity Research 12 March 2025 (1-212) 622-6581 ryan.j.brinkman@jpmorgan.com Rajat Gupta After a slow start to the year and in consideration of the growing reactions toward the brand, which could worsen the trend, we now expect Tesla 1Q25 deliveries of just ~355K, which is -8% y/y from 387K in 1Q24 and -28% q/q from 495K in 4Q24, while also down substantially from our prior estimate of 444K and -15% below Bloomberg consensus for 418K. On account of the material 1Q deliveries sho ...

11 March 2025 | 6:16PM EDT Americas Technology: Hardware: AI data center equipment 4Q24 market share & outlook update BOTTOM LINE: We update our industry networking and server models to reflect the latest available data from 650 Group. In 4Q24, ANET & CSCO gained share in AI Ethernet while NVDA lost share. In the AI server market, DELL & SMCI lost share to white box in the quarter. Our 2025-2028 outlook for AI data center infrastructure is largely unchanged. KEY NUMBERS: 1. Networking and server industry es ...

Summary of PetroChina Conference Call Company Overview - **Company**: PetroChina (0857.HK) - **Industry**: China Energy & Chemicals - **Stock Rating**: Overweight - **Price Target**: HK$8.30 - **Current Price (as of March 11, 2025)**: HK$5.85 - **52-Week Range**: HK$8.60 - HK$5.34 - **Fiscal Year Ending**: December 2023 Key Financial Metrics - **EPS Estimates**: - 2023: Rmb 0.9 - 2024e: Rmb 0.9 - 2025e: Rmb 0.9 - 2026e: Rmb 0.9 - **Sales/Revenue**: - 2023: Rmb 2,656,383 million - 2024e: Rmb 3,129,822 million - **EBITDA**: - 2023: Rmb 420,896 million - 2024e: Rmb 683,191 million - **Net Income**: - 2023: Rmb 155,488 million - 2024e: Rmb 175,900 million Investment Thesis - **Best Yield Play**: PetroChina is considered the best yield play in the energy sector due to its gas price reform and rich natural gas resources, which are crucial for China's carbon neutrality goals [10][4] - **Gas Segment Potential**: The value of the gas segment is expected to increase as market-oriented pricing mechanisms develop, with imported gas losses manageable in the current oil price environment [10][4] - **Downstream Profitability**: The downstream businesses have shown rapid profitability improvements in recent years [11][10] Risk and Reward Analysis - **Price Target Scenarios**: - **Base Case**: Price target of HK$8.30 (+41.88% from current price) with a probability of 5.1% [7][8] - **Bull Case**: Long-term oil price at US$95/bbl, implying a price target of HK$16.70 (+185.47%) [8][10] - **Bear Case**: Long-term oil price at US$60/bbl, with a lower potential for the gas segment [14][10] Market Conditions - **Oil Price Forecast**: - Brent crude oil prices are expected to average US$79/bbl in 2024, US$74/bbl in 2025, and US$71/bbl in 2026 [8][16] - **Gas Volume Growth**: Anticipated growth of 5.1% in 2023, with a steady 6% growth expected in subsequent years [16][10] Consensus and Analyst Ratings - **Consensus Rating Distribution**: - 94% Overweight - 6% Equal-weight - 0% Underweight [13][10] Key Risks - **Upside Risks**: Stronger-than-expected Chinese economic growth, higher oil prices, and increased gas demand due to reforms [21][20] - **Downside Risks**: Weaker-than-expected economic growth, lower oil prices, and inflationary pressures [21][20] Important Dates - **Annual Shareholders Meeting**: Scheduled for June 9, 2025 [16][10] This summary encapsulates the key points from the conference call regarding PetroChina, highlighting its financial outlook, investment thesis, market conditions, and associated risks.

Key Takeaways from the Conference Call Industry Overview - The report focuses on the **China Aviation** sector within the **Asia Pacific** region, specifically analyzing international air capacity and its recovery post-pandemic [1][58]. Core Insights - As of March 10, 2025, **non-domestic Available Seat Kilometers (ASK)** was at **78%** of the levels seen in **2019**, remaining unchanged from the previous week [2][11]. - Year-over-year, China's total absolute non-domestic ASK increased by **19%**, indicating a positive trend in air travel demand [5][11]. - Excluding routes to the **US**, the recovery of non-domestic ASK reached **87%** of 2019 levels, also stable compared to the previous week [11]. - Capacity changes were noted on specific routes: - **Japan** and **US** routes saw a **1%** increase in capacity week-over-week. - **Korea** and **Macau** routes experienced reductions of **3%** and **6%**, respectively [11]. - Year-over-year ASK growth was significant for: - **Japan**: **48%** - **US**: **42%** - **Hong Kong**: **13%** - **Korea**: **12%** - Conversely, ASK decreased for **Macau** by **3%** and for **Thailand** by **12%** [11]. Capacity Recovery by Destination - Seat capacity recovery for selected destinations as of March 2025: - **Japan**: **113%** of 2019 levels - **Thailand**: **54%** - **Korea**: **82%** - **US**: **31%** [11]. Additional Insights - The report highlights that **Hong Kong's** air capacity had been reduced in the second half of 2019 due to social unrest, which may have ongoing implications for recovery [4]. - The data presented is sourced from **OAG** and **Morgan Stanley Research**, indicating a reliance on reputable industry data for analysis [4][8]. Conclusion - The aviation sector in China is showing signs of recovery, with significant increases in capacity and ASK on certain routes, while others are still lagging behind. The overall trend suggests a gradual return to pre-pandemic levels, particularly for routes to Japan and the US, while challenges remain for routes to Macau and Thailand [11].

Summary of Key Points from the Conference Call Industry and Company Overview - The focus of the conference call is on the Japanese economy and its resilience to the appreciation of the Japanese yen (JPY) [1][3][4]. Core Insights and Arguments 1. **Economic Resilience**: The Japanese economy is expected to remain resilient against JPY appreciation due to strong inflation expectations, domestic demand, pricing power, and increased domestic production. This resilience is projected to hold unless the JPY appreciates beyond 130 in the short term [1][4][10]. 2. **Wage Growth**: A third consecutive year of strong wage hikes is anticipated, driven by a structural labor shortage, which will support domestic demand and real income recovery [4][58]. 3. **Capital Expenditure (Capex)**: Non-cyclical structural factors are expected to drive robust capital expenditures, including labor-saving investments and digital-related investments in AI and data centers [4][58]. 4. **Export Dynamics**: Japanese exports are shifting towards high value-added goods, which are less sensitive to price competition, providing a buffer against the adverse effects of currency fluctuations [4][58]. 5. **Impact of US Tariffs**: US tariffs may negatively impact the US economy, potentially leading to lower interest rates, which could support a stronger yen against the dollar [5][10][11]. 6. **Equity Market Outlook**: Japanese equities are viewed positively, with expectations of high-single digit EPS growth in 2025-2026. The 12-month forward P/E multiple for TOPIX is slightly below its 10-year average at 13.8x [6][75]. 7. **Inflation Expectations**: Japan's inflation is unlikely to revert to zero or deflation, supported by rising domestic wages and inflation expectations. Core-core CPI growth is forecasted to stabilize slightly below 2% in the second half of 2025 [48][49]. 8. **Model Simulations**: A simulation indicates that a 10% yen appreciation could reduce real GDP by approximately 0.3%, with varying impacts on consumption, exports, imports, and private capex [53][54]. 9. **Long-term Projections**: The yen is expected to appreciate to around 141 against the dollar by the end of 2025, with limited adverse impacts on the economy [46][54]. Additional Important Insights 1. **Structural Changes**: The shift in Japan's economy from a deflationary environment to a more normal inflationary state is seen as a critical factor enhancing resilience against yen appreciation [63][66]. 2. **Corporate Adjustments**: Japanese companies have adjusted their pricing strategies to account for higher costs, which has allowed them to maintain profit margins despite falling import prices [89]. 3. **Market Dynamics**: The correlation between exchange rates and equity markets in Japan has weakened, indicating that domestic demand plays a more critical role in economic performance than previously thought [19][21]. 4. **Potential Risks**: There is a risk that a sharp yen appreciation could adversely impact the economy, particularly if it breaches the 130 level in the short term [68][67]. This summary encapsulates the key points discussed in the conference call, highlighting the resilience of the Japanese economy amidst currency fluctuations and the positive outlook for Japanese equities.

Summary of Key Points from the Conference Call Industry Overview - The focus is on the Japanese investment landscape, particularly the behavior of Japanese investors who hold approximately **US$48 trillion** in financial assets, the highest international investment position among G10 countries [1][5][5]. Core Insights - **Shift to Inflationary Regime**: Japan is transitioning from a deflationary environment to one characterized by moderate inflation, impacting investment behaviors across various investor categories [1][5][34]. - **Household Investment Behavior**: Households are increasingly protecting their assets against inflation, with an estimated **JPY 6.3 trillion** impact from investments in Japanese stocks via the new Nippon Individual Savings Account (NISA) [5][65]. - **Structural Inflows**: There is a constructive outlook on risky assets due to structural inflows from households, while institutional investors are not expected to actively buy Japanese Government Bonds (JGBs) despite higher yields [5][5]. - **Investment Trusts**: Households are shifting towards investment trusts, particularly those holding overseas securities, driven by the revamped NISA framework [63][63]. Important Trends - **Wealth Management Market Growth**: The mass affluent population in Japan, defined as those with less than **JPY 50 million** in financial assets, is expected to drive significant growth in the wealth management market, with a projected **CAGR of 4.6%** from 2024 to 2030 [48][49]. - **Inflation Expectations**: Long-term inflation expectations among households and firms have risen, with around **70%** of firms preferring moderate price and wage increases [34][78]. - **Financial Asset Composition**: Japanese households are expected to reach **JPY 2,500 trillion** in financial assets by 2030, with a notable shift from cash and deposits to risk assets as inflation expectations rise [98][95]. Potential Risks and Opportunities - **Investment Behavior Changes**: The shift in investment behavior from cash to risk assets is expected to impact various asset classes differently, with households adopting a 'buy and hold' strategy for stocks [65][70]. - **Impact on JGBs**: The JGB yield curve may face structural steepening pressure due to a supply/demand mismatch, although short-term conditions may favor flattening [72][73]. - **Foreign Asset Exposure**: There is an increasing trend of Japanese investors reallocating towards foreign equities and bonds, which may lead to structural weakening of the JPY over the long term [74][74]. Other Notable Points - **Labor Market Dynamics**: The structural labor shortage in Japan is leading to upward pressure on wages, which is expected to sustain inflationary trends [88][90]. - **Demographic Changes**: Japan's aging population necessitates solutions for asset inheritance and management, further influencing the wealth management landscape [50][50]. This summary encapsulates the key insights and trends discussed in the conference call, highlighting the evolving investment landscape in Japan amidst changing economic conditions.

Summary of US Retail Sales Tracker: A Mild February Industry Overview - The report focuses on the **US Retail Sales** industry, providing insights into consumer spending trends and economic forecasts for February 2025. Key Points and Arguments 1. **Retail Sales Growth**: - Headline retail sales are forecasted to rise by **0.3% month-over-month (m/m)** in February, while control-group sales are expected to increase by **0.1% m/m** [1][5][7]. 2. **Real Consumption Trends**: - Real consumption growth is projected to slow to **1.1% annualized rate (a.r.)** in the first quarter (1Q) of 2025, influenced by seasonal factors from winter [1][9][10]. - Despite the slowdown, spending appears solid when averaged over the fourth quarter (4Q) and 1Q, suggesting a healthy pace of **2.75%** [1][9]. 3. **Impact of Seasonal Factors**: - Seasonal factors have distorted retail sales data, particularly in January, leading to exaggerated perceptions of weakness [7][15][24]. - The report emphasizes that seasonal adjustments may not accurately reflect true spending trends due to changes in consumer behavior post-pandemic [15][25]. 4. **Consumer Spending Components**: - Restaurant spending is expected to decline by **-0.2% m/m** in February after a strong January, while building materials sales are forecasted to increase by **0.3% m/m** due to warmer weather and rebuilding needs [8][9]. - Wage income remains solid, supporting overall consumption despite some weakening in credit card spending data [7][10]. 5. **Economic Outlook**: - The report anticipates a slowdown in GDP and consumer spending growth throughout the year due to changes in fiscal, tariff, regulatory, and immigration policies [9][10]. - Labor market income is still robust, but consumer sentiment has shown some weakness, which may not significantly impact overall spending [10]. 6. **Historical Context**: - The report highlights historical patterns in household spending, noting that January typically sees a sharp decline following holiday spending, which complicates year-over-year comparisons [16][17][28]. Additional Important Insights - **Volatility in Consumer Behavior**: - The report discusses how market volatility and changes in household wealth need to be viewed as more permanent to affect consumer spending significantly [10]. - **Correlation of Seasonal Factors**: - There has been a **66% correlation** between the monthly percent change in seasonal factors and the monthly percent change in seasonally adjusted retail sales data, indicating that seasonal adjustments may not be effectively capturing true spending trends [20][23]. - **Long-term Spending Patterns**: - The pandemic has altered traditional spending patterns, leading to increased noise in seasonal estimations and complicating the interpretation of retail sales data [25][19]. This summary encapsulates the key findings and insights from the US Retail Sales Tracker for February 2025, highlighting the current state of the retail industry and the economic factors influencing consumer behavior.

Summary of the 2025 TMT Conference Call Industry Overview - **Industry**: IT Hardware in North America - **Key Topics Discussed**: Resiliency in enterprise spending, AI infrastructure durability, tariff risks, federal government exposure, consumer health, and cost efficiency initiatives were highlighted as significant themes during the 2025 TMT Conference [1][3][16]. Core Insights 1. **Enterprise Hardware Spending**: - 2025 enterprise hardware spending plans are expected to improve compared to 2024, with no signs of material cuts in the last 30 days. However, uncertainty may affect small and medium business (SMB) spending [3][7]. - Growth is anticipated in PCs, storage, and traditional servers, with companies optimistic about PCs and storage [3][16]. 2. **AI Spending**: - Companies expressed confidence in the durability of AI spending across infrastructure and software. Notable mentions include IBM WatsonX and DELL's AI servers, which are well-positioned for growth [3][18]. - DELL expects AI server revenue to grow at least 50% year-over-year in FY26, reaching over $15 billion [18]. 3. **Tariff Risks**: - Companies have diversified supply chains to mitigate risks associated with tariffs, particularly from China and Mexico. Many firms plan to pass increased costs onto customers [18][19]. 4. **Federal Government Exposure**: - Most companies reported limited exposure to federal government spending, with IBM noting only 5% of its revenue comes from federal customers. Concerns about spending friction were acknowledged but not deemed critical [19][20]. 5. **Consumer Health**: - Weakening consumer sentiment was noted, impacting discretionary spending. Companies like SONO and HPQ reported challenges in the consumer PC market, indicating a tough environment for consumer electronics [20][21]. 6. **Cost Efficiency Initiatives**: - A focus on cost efficiencies was prevalent, with many companies adopting AI tools to enhance productivity. For instance, IBM reported productivity gains of up to 40% through internal AI technology [20][21]. Performance Metrics - **Market Performance**: - Since February 19, 2025, the average IT hardware stock has declined by 12%, underperforming the S&P 500 by 6%. Over 50% of the coverage is in correction territory [4][9]. - There has been a significant P/E multiple compression, averaging over 2x since February 19, 2025 [4][12]. Watch List Recommendations - **Overweight Rated Stocks**: - STX, DELL, and KRNT are highlighted as top picks due to strong management outlooks and growth potential [11]. - **Equal-Weight Rated Stocks**: - CDW and TDC are noted for their cautious but stable outlooks amidst current market conditions [11]. - **Underweight Rated Stock**: - SONO is under scrutiny due to concerns over consumer spending and market response [11]. Additional Insights - **Valuation Trends**: - More than 50% of hardware companies are trading below their pre-COVID median P/E ratios, indicating a potential undervaluation in the sector [12][14]. - **Future Outlook**: - While the current environment presents challenges, the overall sentiment remains cautiously optimistic regarding growth in enterprise hardware and AI investments [3][16][18].

Summary of Conference Call Notes Industry Overview - The conference call focuses on the **Internet industry in North America** - The overall performance of internet stocks declined by **4%** last week, with the S&P 500 (SPX) and Nasdaq 100 (NDX) both down **3%** [1][2] Key Company Performances - **Amazon (AMZN)**: Decreased by **6%**, trading at **$199.25** with a market cap of **$2,146.1 billion** and an EV/Revenue of **3.0x** for 2025E [5] - **Alphabet (GOOGL)**: Increased by **2%**, trading at **$173.86** with a market cap of **$2,146.8 billion** and an EV/Revenue of **5.2x** for 2025E [5] - **Meta (META)**: Decreased by **6%**, trading at **$625.66** with a market cap of **$1,626.1 billion** and an EV/Revenue of **8.3x** for 2025E [5] - **DoorDash (DASH)**: Decreased by **10%**, trading at **$178.08** with a market cap of **$82.8 billion** [5] - **Roblox (RBLX)**: Decreased by **10%**, trading at **$57.17** with a market cap of **$41.8 billion** [5] - **eBay (EBAY)**: Increased by **9%**, trading at **$70.51** with a market cap of **$34.2 billion** [5] Valuation Metrics - **AMZN/GOOGL/META** are trading at **26x/17x/22x** their 2026 EPS, reflecting declines of **21%/-15%/-3%** compared to trailing twelve months (TTM) averages [1][2] - The NTM EV/EBITDA multiples for **AMZN, GOOGL, and META** are **12.5x, 11.6x, and 13.4x**, respectively, which are **-9%** and **-11%** lower than their 2-year and 3-year averages [6] Market Sentiment - Broader tariff concerns are impacting investor sentiment, contributing to the decline in internet stocks [1][2] - The **Digital Media** sector shows a median increase of **39%** in EV/EBITDA multiples when treating stock-based compensation (SBC) as cash [11] Additional Insights - The **eCommerce/Marketplace** segment shows a median increase of **21%** in EV/EBITDA multiples when treating SBC as cash [13] - The **Gaming/Mobile App** sector also reflects a median increase of **22%** in EV/EBITDA multiples under the same conditions [14] - The **Travel/Shared Economy** sector shows a median increase of **41%** in EV/EBITDA multiples when treating SBC as cash [18] Conclusion - The internet industry in North America is currently facing volatility, with significant declines in major companies' stock prices due to external economic factors. Valuation metrics indicate a cautious outlook, with potential for recovery if market conditions stabilize.